FT : Carmakers fret over Trump threat to EV subsidies

Carmakers fret over Trump threat to EV subsidies

Does Donald Trump really want to be responsible for the downfall of the US auto industry?

That’s the question posed by some analysts in our report today highlighting fears among carmakers that Trump’s intention to gut Joe Biden’s cornerstone green energy legislation — the Inflation Reduction Act — could undermine electric vehicle sales and investment should he reascend to the presidency in November.

The IRA aims to drive domestic EV manufacturing by offering American consumers incentives if they buy battery cars with parts supplied from the US or its trading partners, rather than turning to Chinese competitors — a threat underlined by new data showing China’s BYD has overtaken Tesla as the world’s biggest EV maker.  

But with Chinese battery makers accounting for more than two-thirds of the world’s supply and China controlling two-thirds of lithium refining capacity, government restrictions come at a cost to American carmakers, which face an expensive shift to South Korean and Japanese suppliers. The new rules introduced on Monday could also hit EV take-up: the number of car models eligible for US tax credits is now down from 43 to 19.

EV sales are still rising across the world, mainly in areas that have generous incentives, although growth is slowing in large markets such as the US over concerns about prices and charging.

In the meantime, BYD and other Chinese manufacturers have been leveraging their country’s control over the production of almost all the necessary resources, material and components needed for EVs. BYD for example controls mines as well as producing batteries and chips.

EV progress among legacy carmakers is patchy. The most promising recent development has been the announcement from Toyota — still the world’s top selling carmaker — that the mass production of solid-state batteries is within reach.

At policy level, the EU is still working out ways to rival the US subsidies, which are drawing battery companies across the Atlantic and slowing progress towards China-free supply chains, despite hopes that €3bn in financial support would help jump start a domestic industry.

Back in the US, some believe Trump is unlikely to follow up on his threat to withdraw incentives for one simple reason: Republican-voting states have been the biggest beneficiaries of investment.

FT : Walt Disney wins backing of ValueAct in fight over its future

Walt Disney wins backing of ValueAct in fight over its future
Entertainment and media group to consult with activist investor on ‘strategic matters’

Walt Disney has won the support of investor ValueAct Capital, as the entertainment company gears up for a fight with activist Nelson Peltz over how to boost profits and lift its share price.

San Francisco-based ValueAct, an activist known for taking a more collaborative approach to its targets, built a stake in Disney last year as the entertainment company contended with its lossmaking streaming business.

Disney on Wednesday said it had entered into an “information-sharing” agreement with ValueAct and would consult the investment firm on “strategic matters”.

ValueAct said it would support Disney’s nominees for election at this year’s annual meeting. The firm owns more than 5mn Disney shares, said a person familiar with the situation.

The shareholder meeting, which typically takes place in March or early April, is set to be a bruising one after Peltz’s Trian Partners said it planned to nominate two candidates to Disney’s board.

Trian controls a roughly $3bn stake in Disney and has been at odds with the group for the past year, accusing the board of being too close to chief executive Bob Iger, who returned to run the company in late 2022.

Disney has been under pressure from investors to curb profligate spending during the streaming boom, as Wall Street has shifted its focus to profitability.

“ValueAct Capital has a record of collaboration and co-operation with the companies it invests in, and its co-CEO Mason Morfit has been very constructive in the conversations we’ve had over the past year,” Iger said on Wednesday.

ValueAct’s less fearsome approach has helped it win favour with previous targets. Salesforce, which a year ago faced an onslaught of activist investors, including Elliott Management, gave Morfit a board seat.

Morfit described Disney as “the world’s leading entertainment company”, adding it had “the best intellectual property, sports brand and parks and experiences assets in the industry”.

ValueAct has not disclosed the size of its stake.

The news of Disney’s agreement with ValueAct came as smaller New York-based activist Blackwells Capital, which has a $5mn stake in Disney, said it would put forward its own slate of nominees at the shareholder meeting.

The firm, which had previously taken aim at fitness company Peloton, said it planned to nominate Warner Brothers Discovery executive Jessica Schell, Tribeca Film Festival co-founder Craig Hatkoff, and Leah Solivan, a venture capitalist who founded TaskRabbit.

In December, Trian said it intended to put forward Peltz and former Disney executive Jay Rasulo as directors. The move marked Peltz’s second effort to force change at Disney after aborting an earlier attempt to allow Iger to implement changes at the group.

Trian’s decision followed Disney’s nomination in November of outgoing Morgan Stanley chair and chief executive James Gorman and Sir Jeremy Darroch, former group CEO of Sky, as board directors.

FT : BP and Equinor scrap New York offshore wind contract as costs rise

BP and Equinor scrap New York offshore wind contract as costs rise
Plan to reset deal follows inflation, higher interest rates and supply chain problems

BP and Equinor reached a deal to scrap a contract to sell energy from a planned offshore wind power project to the state of New York, the latest such venture to be knocked off course by worsening industry economics.

The two Europe-based energy majors on Wednesday said authorities in the US state had allowed them to “reset” a 2022 arrangement to deliver power from their unbuilt 1.26-gigawatt Empire Wind 2 project “in anticipation of new offtake opportunities”.

A combination of higher costs and interest rates and supply disruptions has thwarted the business models of many offshore wind power projects in the US, setting back ambitious visions for the clean energy technology from the Joe Biden administration and several coastal states.

New York’s climate law calls for the state to get 70 per cent of its electricity from renewables by 2030, with a target to install 9GW of offshore wind capacity by 2035.

As part of its plan, the state awarded BP and Equinor contracts to develop the Empire Wind complex about 15 miles south of New York’s Long Island, with 147 turbines set to be spread over 80,000 acres of open sea.

The deal terminated on Wednesday was signed in 2022. BP and Equinor had agreed to sell renewable energy credits from the 1,260MW Empire Wind 2 phase of the project at a strike price of $107.50 a megawatt-hour.

“Commercial viability is fundamental for ambitious projects of this size and scale,” said Molly Morris, president of Equinor Renewables Americas. “The Empire Wind 2 decision provides the opportunity to reset and develop a stronger and more robust project going forward.”

The companies had earlier petitioned the state utilities regulator to renegotiate the prices of the credits, saying “unforeseeable economic forces” — including inflation stemming from the war in Ukraine and Covid-19, supply chain bottlenecks and interest rate increases, along with permitting delays — had affected the “financial attractiveness” of the project.

The requested relief would have increased the Empire Wind 2 strike price by two-thirds to $177.84/MWh, according to a document filed with the New York State Public Service Commission. The regulator denied their request in October.

But a separate state energy agency in November announced a new solicitation process which it said would be open to “all project developers, including those that previously petitioned the New York State Public Service Commission for financial relief”.

Bids under New York’s new solicitation are due by January 25 with winners announced next month.

The agreement is the latest evidence of the malaise engulfing the fledgling offshore US wind industry but also illustrates the willingness of state authorities to provide flexibility to prevent projects from being abandoned.

Last year, Avangrid, the US subsidiary of Spanish utility Iberdrola, cancelled contracts to sell power generated by projects off Massachusetts and Connecticut after asserting they had become “unfinanceable”.

In October, Ørsted ditched two projects off the coast of New Jersey outright blaming “macroeconomic factors [that] have changed dramatically over a short period of time”.

The New York State Energy Research and Development Authority, the agency responsible for wind power contract solicitations, on Wednesday said it “remains committed to advancing clean energy at the best value for New Yorkers, and we are encouraged that Equinor and BP continue to be committed to developing the offshore wind industry and New York’s green economy as they reset this project”.

>>> US After Hours Summary: RGP +5.2% higher on earnings; CALM -6.5% slips on ea

After Hours Summary: RGP +5.2% higher on earnings; CALM -6.5% slips on earnings; ABBV -2.2% slips as CVS Caremark to remove Humira from formularies; SAVE +2% on sale-leaseback transactions

After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: RGP +5.2%, ASTL +0.2%
Companies trading higher in after hours in reaction to news: KROS +3% ($120 mln stock offering), CIFR +2.8% (60 mw expansion of its bear and Chief Joint Venture data centers and purchase of 16,700 new miners from CAN), FUBO +2.2% (NXST and FUBO reach multi-year distribution agreement), SAVE +2% (completes series of sale-leaseback transactions for 25 aircraft), PRCH +1.9% (new partnerships in its utilities channel), GEOS +1.6% ($30 mln contract win with marine geophysical services provider), CAN +1.5% (secures follow-on purchase orders from JV entities of CIFR and SDIG), SEM +1.4% (to pursue separation of its occupational health services business, Concentra), ADC +1.2% (provides portfolio update), COLD +0.2% (CFO to step down; names new CFO), CVS +0.2% (CVS Caremark to remove ABBV's Humira from its major national commercial template formularies; instead Humira biosimilars will be covered)

After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: CALM -6.5%, SLP -0.4% (also announces leadership changes, including CFO assuming additional role of COO)
Companies trading lower in after hours in reaction to news: OPK -11.3% (commences $200 mln convertible notes offering), DYN -7.9% (commences $175 mln stock offering), ABBV -2.2% (CVS Caremark to remove ABBV's Humira from its major national commercial template formularies; instead Humira biosimilars will be covered), INTC -0.3% (names Justin Hotard as EVP and GM of its Data Center and AI Group), BMI -0.1% (BMI acquires remote water monitoring hardware and software from TRMB), CGNX -0.1% (CFO to resign), CR -0.1% (to acquire Vian Enterprises)

>>> US Close Dow -0.76% S&P -0.80% Nasdaq -1.18% Russell -3.31%

Closing Stock Market Summary

The stock market registered broad based losses today. The Russell 2000 underperformed other major indices, declining 2.7%, while the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite declined 0.8%, 0.8%, and 1.2%, respectively.

Early selling, driven by profit-taking activity, had the major indices trading down ahead of the 2:00 p.m. ET release of the minutes for the December 12-13 FOMC meeting. The market experienced some volatility in response to the minutes, ultimately settling near session lows. The S&P 500 briefly slipped below the 4,700 level at its low of the day.

In discussing the policy outlook, the committee viewed the policy rate as likely at or near its peak for this tightening cycle. The Fed made it clear, however, that it isn't divorcing itself entirely from the idea that it might still have to raise rates again.

Rate cut expectations have decreased slightly following this release. The probability of 25 basis points rate cut at March FOMC meeting stands at 70.8% versus 79.0% yesterday and the probability of 25 basis points rate cut to at May FOMC meeting is 60.3% versus 73.6% yesterday.

Just about everything participated in downside moves today. Eight of the 11 S&P 500 sectors logged a decline with five of those sectors falling more than 1.0%. The real estate sector (-2.4%) saw the largest decline by a wide margin followed by the consumer discretionary sector (-1.9%).

Meanwhile, the energy sector outperformed, gaining 1.5%, as oil prices climbed ($72.82/bbl, +2.29, +3.3%).

Early selling in the Treasury market started to dissipated before 2:00 ET, but yields hit their intraday lows following the release. The 2-yr note yield declined one basis point to 4.32% and the 10-yr note yield fell four basis points to 3.91%.

Dow Jones industrial Average: -0.7%
S&P 500: -1.4%
S&P Midcap 400: -2.6%
Nasdaq Composite: -2.8%
Russell 2000: -3.4%
Reviewing today's economic data:

Weekly MBA Mortgage Applications Index -9.4%; Prior -1.5%
December ISM Manufacturing Index 47.4% (consensus 47.1%); Prior 46.7%
The key takeaway from the report is that the manufacturing sector remains stuck in contraction, but the report was not devoid of good market news, as the Prices Index sliding to 45.2% from 49.9% reflects a further easing of inflation pressures.
November JOLTS - Job Openings 8.790 mln; Prior was revised to 8.852 mln from 8.733 mln
Looking ahead, Thursday's economic calendar features:

8:15 ET: December ADP Employment Change (consensus 114,000; prior 103,000)
8:30 ET: Weekly Initial Claims ( consensus 220,000; prior 218,000) and Continuing Claims (prior 1.875 mln)
9:45 ET: Final December S&P Global U.S. Services PMI (prior 50.8)
10:30 ET: Weekly natural gas inventories (prior -87 bcf)
11:00 ET: Weekly crude oil inventories (prior -6.911 mln)

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • DYN +101.5%, AGIO +57.7%, TDCX +30.2%, FEAM +12.5%, ASTS +8.5%, ALVO +5.6%, GLYC +5.5%, PGTI +4.6%, BLMN +4.4%, PSTG +4.4%, SYRS +3.1%, PDCO +2.6%, MOD +1.8%, LBPH +1.7%, PNTG +1.3%, GSK +0.9%, EGO +0.8%
  • Gapping down:
    • CMPS -5.9%, ODP -5%, AMPS -3.5%, SLNO -2.5%, KKR -1.6%, FUBO -1%, AMC -0.7%

>>> What to look at today - 3rd of January 2024

sian equities slipped, tracking a drop in US stocks and Treasuries as Wall Street’s risk-on mood faded with declines in big tech. The dollar held on to its gains.  Benchmarks in South Korea and Australia fell more than 1% after closing at their highest levels since at least mid-2022 in the previous session. Shares in mainland China were mixed. Japanese markets remain closed for a holiday. The new year has started on a somber note, after huge bets on a Federal Reserve pivot spurred a worldwide rally in both stocks and bonds in the fourth quarter. Contracts for US shares were little changed after the Nasdaq 100 dropped the most in more than two months on Tuesday as tech sector giants dubbed the Magnificent Seven fell.      Treasury futures advanced modestly in Asian hours Wednesday, but trading of cash Treasuries is still closed due to the Japanese holiday. Bonds slumped in US trading, partly reflecting doubts that policymakers will deliver the extent of monetary easing that’s priced by money markets, with central banks reluctant to give up the fight against inflation too soon.  The dollar traded in narrow range against its Group-of-10 peers after notching its biggest daily gain since March.  China tech stocks are in focus after a report that Beijing removed a top official who oversaw the nation’s gaming industry, which suggests the government is trying to tamp down a backlash against harsh new regulations that triggered an $80 billion rout across the sector. Tencent Holdings Ltd. and smaller rival NetEase Inc. reversed earlier losses. Traders are now waiting for the release of the latest Fed minutes Wednesday. The tone is expected to be hawkish, according to BMO Capital Markets’ Ian Lyngen. Wednesday’s job openings data and Friday’s nonfarm payrolls will also be scanned for signs of weakness in the labor market.  Bitcoin hovered around $45,000 after climbing above that level for the first time in almost two years Tuesday on anticipation around the expected US approval for an exchange-traded fund investing directly in the biggest token. Oil held a drop as broad risk-off sentiment undercut concerns about escalating conflict in the Red Sea. US After Hours PSTG +4.5% up on index change; BLMN +3.4% edging higher following Starboard Value pact.

Nikkei Closed Hang Seng -1.25% CSI -0.51% Shanghai -0.17% Shenzen -0.97%

Eur$ CNH CNY JPY GBP CHF RUB TRY WTI$ Gold BTC ETH

S&P -0.04% Nasdaq -0.09% EuroStoxx -0.31% FTSE -0.14% Dax -0.28% SMI

Macro :
- Goldman Tops M&A Advisory Ranking as Rivals Maneuver
- Citi Says Short Squeeze on Horizon if S&P 500 Resumes Rally
- Italy Dec. New Car Sales Rise 5.88% Y/y

Keep an eye on :
- AIR FP : Airbus Working on Up to €1.8b Offer for Atos Cyber Unit: FT
- AGR US : Avangrid to Avoid Takeovers After Abandoning $4.3 Billion Deal
- ATO FP : Airbus Working on Up to €1.8b Offer for Atos Cyber Unit: FT
- BA US : Boeing Reached Annual 737 Delivery Target With Year-End Flurry
- IBE SM : Iberdrola Ends $4.3 Billion Deal to Buy US Power Firm PNM
- LIAB SS : Lindab Buys US Manufacturer of Ventilation Duct Machinery
- MAERSKB DC : Maersk Decides the Red Sea Is Too Unsafe for Its Ships for Now
- PSH NA : Pershing Square Holdings Dec. Net Performance +9.3%
- REN PL : Portuguese Electricity Demand Rose 6.9% in December, REN Says
- RWE GY : Germany to Accelerate Write-Offs for Gas Pipelines: HB
- STLAM IM : Italian New Car Sales Jump 19% in 2023 Compared With Prior Year
- TPR US : Tapestry Rises as JPMorgan Hikes PT on Coach Strength (1)